Inflation and trade disputes taint prospects for global economy

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Momentum in the global economy has peaked and risks ranging from higher inflation to trade disputes and debt appear likely to taint prospects for 2018, according to the tracking index compiled by the Brookings Institution think-tank and the Financial Times. The latest update to the index shows that forces contributing to growth remain strong but have levelled off below last year’s peak, while financial markets suggest more challenging times ahead. The findings follow a series of disappointing business surveys across the world and weak industrial data, which have reduced confidence among economists that 2018 would be the most successful year of the decade so far. Christine Lagarde, managing director of the IMF, last week warned of an “inexcusable, collective policy failure” if trade tension undermined the world economy. She suggested the fund would not downgrade its 3.9 per cent global growth forecast on Tuesday, when it releases its latest economic outlook. The more up-to-date Brookings-FT Tracking Index for the Global Economic Recovery (Tiger) shows the latest data suggest that momentum is fading. Eswar Prasad of the Brookings Institution said: “The world economy’s growth momentum remains strong but is levelling off as the winds of trade war, geopolitical risks, domestic political fractures, and debt-related risks loom, with financial markets already reflecting mounting vulnerabilities.” The index compares many indicators of real activity, financial markets and investor confidence with their historical averages for the global economy and for individual countries. In advanced economies, the composite index has dipped in 2018 on the back of slightly weaker hard data on output and jobs and a sharp decline in financial market prices.